K O L

DAILY FX OUTLOOK
Wednesday, October 15, 2014
Major FX Themes

The dollar bounced higher across the board on Tuesday following
disappointing EZ (German ZEW, EZ industrial production) and UK (CPI)
data points. The greenback also received a boost after the Fed’s Williams
(voter in 2015), in fairly balanced remarks, downplayed risks from external
growth concerns, reiterated that the Fed trajectory remained a function of
inflation and wage developments, and continued to expect a rate hike in
mid-2015. Meanwhile, the JPY also benefitted across the board on
softening yen-crosses.
FX Strategy/Trading Ideas – Medium Term G7 Heat Map

With global growth worries continuing to circulate and crude plumbing lower,
the FXSI (FX Sentiment Index) continued to push deeper into Risk-Off
territory on Tuesday. Expect the greenback to derive some support at the
margins from latest Fed speak, with the Fed’s Mester also cited in the NYT
as saying that she hasn’t reduced her growth or inflation outlook on account
of the global economic outlook. In addition, she noted that the appreciation
of the dollar would have to be on a sustained basis before she would
consider altering her outlook.

In our refreshed medium-term FX Heat Map, we have the USD still firmly at
the helm across G7 space, especially with the taper slated to terminate at
the FOMC at the end of this month. Elsewhere in Asia and outside of
renminbi space, we think the regional currencies have also essentially (and
finally) latched on to the potential stronger dollar dynamic at this juncture.

Elsewhere, our 22 Sep 14 idea to be short EUR-GBP (0.7864) was stopped
out on 13 Oct14 at 0.7925 for an implied -0.73% loss as the luster attached
to BOE rate hike expectations were likely suspended amid cited position
adjustments.

On the Asian front, our 10 Jul 14 recommendation for a 3M short SGD-MYR
(outright: 2.5673) expired at implied 2.5621 on Tuesday, barely yielding an
implied +0.20% gain as risk appetite jitters and recent BNM neutrality saw
the MYR underperform.
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Emmanuel Ng
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Asian FX
ngcyemmanuel@ocbc.com

The dollar also firmed against EM currencies on Tuesday with the ACI
(Asian Currency Index) ticking higher on the day. Amid evaporating net
portfolio capital inflows and soft recovery prospects (note BOK cut 25bps to
15 October 2014
Daily FX Outlook
2.00% as expected this morning while India’s September CPI inflation
dipped), expect any resurgence in broad dollar strength (driven either by the
Fed or risk aversion) to negative impact the regional currencies. In the
interim, markets may also continue to monitor data releases out of China
(note the easing 14-day repo rate yesterday), with September CPI numbers
due today (0130 GMT) and monetary aggregates due in the latter part of
this week. We stay positive on CNH prospects in the interim.

The SGD NEER is perceptibly softer this morning at around +0.38% above
its perceived parity with yesterday’s MAS MPS (Monetary Policy Statement)
essentially a non-mover. Amid risk aversion and global growth jitters, note
also that the index has softened in the current week with the SGD
underperforming the USD, JPY and CNY. Meanwhile, NEER-implied USDSGD thresholds are also higher this morning with the pair expected to trade
in the upper reaches of a 1.2730-1.2830 range in the near term. On other
fronts, expect the USD-MYR to also react higher within a 3.2700-3.2800
range.
Asian Curreny Index
106
105
104
103
102
101
Current
SGD NEER % deviation
122.71
0.35
USD-SGD
1.2768
10/10/2014
10/09/2014
10/08/2014
10/07/2014
10/06/2014
10/05/2014
10/04/2014
10/03/2014
10/02/2014
10/01/2014
100
+2.00%
Parity
-2.00%
124.73
122.28
119.83
1.2565
1.2816
1.3078
Source: OCBC Bank
G7

Treasury & Strategy Research

EUR-USD
Apart from the disappointing data points, the EUR was also
weighed by Fitch putting the ratings of France on Rating Watch Negative
and growth downgrades from the German government. Expect potential for
further bearishness with the ECB’s Draghi scheduled to make two
appearances today and German September inflation numbers also on tap.
With the pair dissolving below 1.2700 once again, prospects of a test
towards 1.2600 may once again loom with markets likely to fade any upticks
intra-day.

USD-JPY
Sinking UST yields and yield differentials, coupled with risk
aversion, continued to keep the USD-JPY suppressed on Tuesday. US
retail sales and the Beige Book later today present additional event risks
and we maintain a heavy tone for the pair. We continue to watch for a
sustained break below the 107.00 floor ahead of the Fibo retracement level
around 106.80 and another interim support at 106.60.
2
15 October 2014
Daily FX Outlook

AUD-USD
Expect investors to remain wary of upside probes at this
juncture in the face of global economic concerns and if 0.8700 is violated, a
re-test towards the recent lows of 0.8643 cannot be discounted.

GBP-USD
With disappointing September CPI readings pulling gilt
futures higher and with markets attempting to defer odds of a BOE rate hike,
GBP-USD sliced below 1.6000 and note that the pair has broken below
1.5900 early Wednesday in Asia. Labor market readings are also due today
and with the GBP-USD at a year-to-date low, risks for the pair remain
towards south.
FX Sentiment Index
3.5
3.0
2.5
RISK OFF
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
RISK ON
-1.5
3-Oct-14
3-Apr-14
3-Oct-13
3-Apr-13
3-Oct-12
3-Apr-12
3-Oct-11
3-Apr-11
3-Oct-10
3-Apr-10
3-Oct-09
3-Apr-09
3-Oct-08
3-Apr-08
3-Oct-07
3-Apr-07
3-Oct-06
3-Apr-06
3-Oct-05
-2.0
Source: OCBC Bank
1M Correlation Matrix
DXY
CHF
SGD
TWD
CAD
PHP
THB
IDR
MYR
KRW
INR
CCN12M
JPY
CNH
CNY
USGG10
GBP
AUD
NZD
EUR
DXY USGG10
1.000
-0.719
0.975
-0.737
0.940
-0.656
0.864
-0.797
0.852
-0.755
0.834
-0.606
0.825
-0.764
0.823
-0.877
0.797
-0.639
0.789
-0.938
0.777
-0.535
0.527
-0.144
0.344
0.187
0.195
0.183
-0.283
0.386
-0.719
1.000
-0.729
0.767
-0.935
0.707
-0.947
0.759
-0.988
0.702
CNY
-0.283
-0.240
-0.261
-0.098
-0.471
-0.053
-0.162
-0.195
-0.058
-0.289
0.058
0.196
0.365
0.643
1.000
0.386
0.418
0.322
0.213
0.246
SPX MSELCA
-0.578
-0.828
-0.554
-0.804
-0.483
-0.782
-0.593
-0.893
-0.746
-0.825
-0.438
-0.794
-0.571
-0.775
-0.689
-0.923
-0.445
-0.812
-0.751
-0.899
-0.400
-0.690
-0.193
-0.416
0.394
0.067
0.192
0.040
0.526
0.409
0.893
0.915
0.708
0.754
0.590
0.833
0.623
0.844
0.533
0.812
CRY
-0.625
-0.577
-0.623
-0.546
-0.662
-0.461
-0.498
-0.567
-0.487
-0.655
-0.282
-0.124
0.057
0.301
0.609
0.699
0.570
0.677
0.519
0.602
GC1
-0.685
-0.702
-0.701
-0.580
-0.333
-0.560
-0.602
-0.463
-0.543
-0.477
-0.427
-0.199
-0.699
-0.225
-0.147
0.388
0.241
0.571
0.569
0.687
CL1
-0.525
-0.515
-0.526
-0.523
-0.692
-0.336
-0.602
-0.672
-0.395
-0.764
-0.290
-0.011
0.442
0.428
0.660
0.891
0.764
0.540
0.495
0.49
VIX
0.540
0.492
0.464
0.578
0.714
0.486
0.474
0.667
0.496
0.689
0.413
0.249
-0.348
-0.180
-0.522
-0.845
-0.606
-0.605
-0.605
-0.493
ITRXEX
0.475
0.504
0.472
0.589
0.617
0.395
0.650
0.758
0.441
0.809
0.399
-0.048
-0.511
-0.412
-0.518
-0.883
-0.721
-0.483
-0.545
-0.448
Source: Bloomberg
Treasury & Strategy Research
3
15 October 2014
Daily FX Outlook
Immediate technical support and resistance levels
EUR-USD
GBP-USD
AUD-USD
NZD-USD
USD-CAD
USD-JPY
S2
1.2523
1.5750
0.8643
0.7709
1.1308
107.00
S1
1.2600
1.5800
0.8700
0.7800
1.1314
107.02
Current
1.2639
1.5889
0.8703
0.7825
1.1317
107.34
R1
1.2700
1.5898
0.8800
0.7900
1.1400
108.00
R2
1.2920
1.5900
0.8974
0.8176
1.1450
110.09
USD-SGD
EUR-SGD
JPY-SGD
GBP-SGD
AUD-SGD
1.2644
1.6012
1.1800
2.0197
1.1031
1.2700
1.6100
1.1850
2.0200
1.1100
1.2767
1.6136
1.1896
2.0286
1.1111
1.2796
1.6200
1.1897
2.0300
1.1200
1.2800
1.6352
1.1900
2.0344
1.1364
1198.49
16.73
1200.00
17.30
1230.90
17.35
1236.03
17.40
1254.28
18.09
Gold
Silver
Source: OCBC Bank
FX performance: 1-month change agst USD
2.0
%
1.0
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
ZAR
RUB
PLN
TRY
HUF
ARS
CLP
MXN
BRL
COP
CNY
TWD
INR
KRW
PHP
IDR
THB
MYR
SEK
SGD
JPY
NOK
CHF
NZD
CAD
AUD
GBP
-7.0
EUR
-6.0
Source: Bloomberg
Medium Term G10 FX Heat Map
AUD
AUD
NZD
2
NZD
2
EUR
1
2
GBP
1
2
EUR
GBP
1
1
9
1
1
1
2
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
JPY
JPY
9
1
1
1
CAD
1
1
1
1
2
USD
1
1
1
1
2
SGD
1
1
1
1
CAD
2
USD
2
1
9
2
9
1
2
2
2
Source: OCBC Bank
Treasury & Strategy Research
SGD
4
15 October 2014
Daily FX Outlook
G10 FX Heat Map
AUD
NZD
AUD
EUR
GBP
2
2
1
9
1
1
2
2
1
9
1
1
1
2
2
2
1
2
1
9
1
NZD
1
EUR
2
2
GBP
2
2
JPY
2
2
JPY
1
1
1
1
CAD
9
9
2
2
1
USD
1
1
2
1
1
SGD
1
1
2
9
CAD
USD
1
SGD
1
2
2
1
2
2
2
1
2
Source: OCBC Bank
Asia FX Heat Map
USD
USD
JPY
CNY
SGD
MYR
KRW
TWD
THB
PHP
INR
IDR
1
2
2
2
2
2
2
2
2
2
1
2
2
2
1
2
2
2
2
1
1
2
2
2
2
1
2
2
2
2
2
2
1
2
2
1
1
1
1
2
2
2
2
2
1
2
1
1
2
1
1
2
1
2
JPY
1
CNY
2
1
SGD
2
2
1
MYR
2
2
1
2
KRW
2
2
2
2
2
TWD
2
1
2
2
1
2
THB
2
2
2
2
1
2
2
PHP
2
2
2
2
1
2
1
1
INR
2
2
1
1
1
2
1
1
1
IDR
2
2
2
2
2
1
2
2
2
2
2
Source: OCBC Bank
Treasury & Strategy Research
5
15 October 2014
Daily FX Outlook
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